Ritu Kumar, CDC's Director of Environmental and Social Responsibility, writes for Business Fights Poverty about the importance of improving job quality in supply chains.
Improving job quality in supply chains benefits everyone. More reasonable working hours, fairer pay and better working conditions are all fundamental for employees – and companies gain as a result of implementing these measures too. Doing so can improve productivity, protect a brand’s reputation and, according to research from KPMG, increase profit margins by as much as 0.4 per cent in industries where profit margins typically range between one and two per cent.
CDC’s experience has been that improved working conditions, adequate provision of workplace safety, and investing in workers through training to upgrade skills not only results in increased worker satisfaction and job quality, but benefits the business as well.
Ensuring better working conditions
Companies have a responsibility to ensure that fair wages, reasonable working hours and overtime payments are in place across their supply chains. These are basic employee rights under International Labour Organisation (ILO) conventions which, as well as protecting the employee, help save costs for the company, improve productivity through lower rates of attrition and absenteeism, and reduce reputational risk.
For businesses with large supply chains, improving working conditions has a tangible impact on the lives of thousands of people. CDC has worked with Jabong – a large online retailer in India – to make them the first Indian member of the Ethical Trading Initiative (ETI). A key component of this was developing a Code of Conduct for suppliers to protect the rights of supply chain workers. The Code is focused on achieving good practice amongst suppliers in health, safety and labour rights. Since the Code was introduced, around 1,500 suppliers have signed up to it, benefitting the lives of thousands of workers. It has since been taken up by Jabong’s parent company, Global Fashion Group (GFG) and is now being implemented by four other companies in the group, across different countries.
The benefit to Jabong and GFG is that it strengthens their supply chain and reduces reputational risk. It provides a clear picture about the long-term sustainability of the supply chain, as suppliers who are strong on social compliance also tend to be strong in terms of quality and efficiency.
Being rigorous with health and safety
Accidents and injuries can mean people are forced out of work, having a profound impact on their lives and the lives of families they may support.
They are also damaging for businesses – resulting in costly legal action, shut downs of factories and reputational damage for the supplier and the company at the head of the chain. In fact, the ILO estimates the cost of workplace accidents to be around four per cent of global Gross Domestic Product (GDP).
It’s essential for companies to make sure their contractors all provide safe working environments for their employees. This should include measures like full health and safety training, ensuring all employees wear personal protective equipment and the rigorous implementation of work permitting among other things. At CDC we take this very seriously and try to ensure that businesses we invest in adhere to high standards of health and safety across the supply chain.
Investing in people’s futures
Businesses with large supply chains also have an excellent opportunity to develop the skills of the people who contribute to them. The construction sector is one where there is a huge potential to provide training for unskilled workers so that they can upgrade to better paid and more satisfying jobs such as masons, plumbers, electricians. We are currently working on a project to do just this in the hope that it will motivate individual employees to progress their careers while at the same time create a pool of skilled, high quality work force in the region. Businesses can then source technical skills locally at a lower cost, rather than bringing in workers from outside of the area.
By placing greater emphasis on job quality in supply chains and implementing programmes such as these businesses can provide a more sustainable future for themselves and their employees.
This article was originally published on the Business Fights Poverty website here.